zak mir mining special update

Today was going to witness a video blog here on the Spreadbet Magazine website, a genre which tends to be quicker off the mark in terms of making it onto the web page. The chosen stocks for the video were African Barrick Gold (ABG), Hochschild Mining (HOC), Anglo American (AAL), Petropavlovsk (POG) and Avocet Mining (AVM).

The idea behind this particular selection was not to be mega bullish or bearish of this highly volatile asset class, but actually to show how varied the fortunes of the various members of this sector are at the moment. This is of course not too surprising given that Petropavlovsk (POG) is a Russian Gold miner and Mother Russia is currently looking to expand its nurturing hands into Crimea. Additionally, the deteriorating Chinese economy is hurting mining shares.

In fact, the video was based on yesterday’s closing prices for the aforementioned companies, at which time we could go from bullish to progressively more bearish as one moved down the list. Instead, the three stocks written up here are probably best described as “mixed” technically speaking, even though each provides its own particular lessons.

As I have hinted, this morning’s sharp collapse has rather upset the charting apple cart at African Barrick Gold, delivering a sharp gap to the downside. Such gaps indicate that market participants have been caught on the hop. This is perfectly understandable given the recent recovery trend, and the way that yesterday’s price action consisted of a bear trap rebound from below the 10 day moving average currently at 292p. However, in the wake of the shakeout today it may be that it is the 20 day moving average at 282p which now comes into play, along with the last January low at 274p. These two levels will be useful as far as the close for the shares today.

In the event that the stock cannot get back above 274p, this would imply that there is further downside in the coming days, perhaps as low as the 50 day moving average now at 238p. Also quite damning would be the RSI oscillator remaining below the neutral 50 level versus the 47 level currently. It is usually the case that the RSI dropping below 50 is a leading indicator on the decline of a stock or market, something we have, rather ominously, seen over the past couple of sessions on the FTSE 100.

With the demise of African Barrick Gold, at least for now, the winner of this particular beauty contest would appear to be Hochschild Mining (HOC). This is said in the wake of the Saucer / Cup & Handle chart pattern in place on the daily chart here over recent months. The reason for describing the set up here as a mixture of two of these major charting patterns, rather than just one, is the way that this is actually something in between.

I would venture to suggest we are looking at a “casserole dish” (!) in the sense that both October and March now serve up “handles” on a deep rounded formation. Perhaps the best way forward here though is to suggest that we wait on an end of day close above 2013/4 neckline resistance at 210p, just in case there is a sudden breakdown of the type seen in African Barrick Gold. But at least above the October resistance line points to an implied recovery towards the former September gap zone at 250p plus within 4-6 weeks of any break taking place.

It is perhaps ironic that of the three charts here today, it was arguably Anglo American (AAL) that looked to be the most likely to break to the upside going into this week. This is because we appeared to be in the run up to a November to March Cup & Handle reversal, with the idea being that at least while there was no end of day close back below the floor of the Handle at 1,475p, a break of the 1,600p resistance zone could lead to Cup & Handle measured move target as high as 2,000p.

Unfortunately, it would appear that rather than a big bull run, we have seen an almighty bull trap for Anglo American through its 200 day moving average at 1,433p, While the story is not 100% over for the bulls, it is the case now that one would really wish to see an end of day close back the late February 1,475p swing low before even beginning to consider this situation as being a bona fide long opportunity.